November 15

Personal Finances in your 30’s

Posted by on November 15, 2012 at 8:00 PM

Personal Finances in your 30s

This is part two of five of the personal finance in your 20’s30’s40’s50’s, and 60’s series at Bargainmoose.ca. Unfortunately, in your 30’s this is where the personal finance crunch really takes off. One of the major reasons for this big personal financial crunch that occurs in your 30’s is having children.

Paying for daycare, which can cost upwards of $900 a month in certain cities or even $1000 a month in British Columbia (source: cbc), or deciding to stay at home (which can reduce you from two incomes to one income or 1.5 incomes if one parent works part-time) once you have children is a difficult decision to make. Other expenses start coming down the pipe in your 30’s, like paying for your children’s extracurricular activities (soccer, swimming… ballet…you name it!), birthday parties, and other experiences for your child. It can be very easy to get carried away.

Here are some important personal finance strategies to think about in your 30’s:

Start and Stick With an RESP

Investing in an RESP provides post-secondary funding for your child. The government of Canada actually encourages parents to save for their children’s education and they do this by providing a supplement of 20% of your contribution (called the Canada Education Savings Grant) to your RESP savings. Basically if you max out your contributions, it is $7200 of free money from your friend, the government. Taking advantage of this would be very prudent.

Paying Down the Mortgage

As you start paying down the mortgage, you will add to reducing the total interest paid. Every little bit counts to reduce the interest. The Financial Agency of Canada has a very detailed website on how to pay your mortgage off faster and what it might look like in the long run.

For example, on a $150,000 mortgage with an interest rate of 5.45% (fixed over 5 years), over the 25 year life of the mortgage, if you just pay an extra $50 per month, that equates to saving $14,000 on interest and being able to pay the mortgage off 2.5 years sooner. To really break it down, $50 a month is equal to $1.67 a day.

Yes, you read that right: $1.67 a day. That is less than a cup of plain coffee (not a latte) per day. Two years closer to financial freedom is that easy.

Continuing to Save

If you haven’t already, it is important to start investing your money. The recommended amount of fixed income assets is your age. For example, if you are 32, you should have 32% of your portfolio in fixed income (like bonds, guaranteed income certificates, high interest savings) and the rest in higher growth (also higher risk) equities.

In the “Ultimate Retirement Guide” by CNN Money, they recommend the same allocation according to your age. In addition, they caution that the asset allocation between stocks and fixed income should actually be 110 minus your age because people are living longer and longer. Therefore, CNN Money recommends that if you were 30 years of age, you should have 40% of your portfolio in fixed income investments.

Avoid Lifestyle Inflation As Best You Can

Banks are going to want to lend you money. Avoid the Home Equity Line of Credit if you can. Borrowing for a new 60” flat screen television set, a new car, a new cottage, and exotic vacations can seem too easy at this point with low interest rates. Avoid “Keeping up with the Jones’” by remembering that life isn’t about materialism. Teach this to your children as well.

Buy Used if You Can

Finally, buying things used (or shall I say second hand because it sounds better than “used”) or even refurbished such as fax machines, brand-name vacuums, etc can really save you money. Many refurbished items are 40% off the retail price and include a 1-year warranty. Check out consignment stores for your children’s clothes. Share clothes with your friends by doing a clothes swap. Go buy your children’s school binders at the thrift store. Helping your wallet while simultaneously helping the environment is always a good thing.

Bargainmoosers 30’s and beyond, do you have any tips for other Bargainmoosers in their 30’s?

(photo credit: Tax Credits)

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8 Comments to “Personal Finances in your 30’s”

  1. mojo says:

    I think you are spot on about paying down your mgt. That should be your number one priority, last should be your childs RESP. Don’t get me wrong, I think saving for your children’s future is important. But your MGT should come first. Once that is paid off everything else can be taken care of with out any burden. You’d be surpprised how much money you have extra when you have no MGT. The max life time for an RESP is $50,000 per child. You could easily do this without a mgt in just under 4 years with appx $1050 a month in contributions. Just food for thought.

    • JKo says:

      True about the importance of paying down your mortgage first, however don’t leave your RESP until too late (which I see MANY people do). Only $2500 per year is eligible to receive the grant funds from the government, and in addition, you can catch up on 1 missed year per year. Therefore, making a $5,000 contribution in 1 year will max out what the government will put in (if you have 1 or more years where you missed contributing or did not max out for the year).

  2. Ann says:

    Not having kids is the best financial decision you can make.

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